Steve Jobs made it clear that anything under 10 inches didn’t make the grade as a fully fledged tablet, but it appears that according to a report on Digitimes that Apple may be preparing to launch a new 7.85 inch iPad by the end of 2012.

The report also indicates that Apple are slightly concerned about the level of interest that the Amazon Kindle Fire is receiving since release. They say “In order to cope with increasing market competition [from]…the 7-inch Kindle Fire…and the launch of large-size smartphones.”

The display for the new iPad will be provided by LG and AU Optronics (AUO). Production is said to happen before the end of Q2 in 2012.

These reports have been verified by CNET, who spoke to Richard Shim, an analyst at DisplaySearch. Apple are definitely showing an interest in making a 7.85 inch tablet – dubbed the ‘mini ipad’. The plan appears to be for a release after the 9.7 inch version with QXGA screen.

Steve Jobs: didn't want to release a 'smaller' tablet computer.

Steve Jobs, the recently deceased Apple CEO was very against releasing a smaller tablet. He said at the time “Apple has done extensive user testing and we really understand this stuff…There are clear limits on how close you can place things on a touch screen, which is why we think 10 inch is the minimum screen size to create great tablet apps. One naturally thinks that a 7-inch screen would offer 70 percent of the benefits of a 10-inch screen…this is far from the truth. Seven-inch screens are 45 percent as large as an iPad. This size isn’t sufficient for making great tablet apps.”

The Kindle Fire is already coming under attack for a twitchy touch screen, which Amazon are addressing with a new software update, due very shortly. Can Apple do it better? With their experience in the sector, we would imagine it would be released without any of the problems Amazon have been experienced since their launch.